FINRA Overhauls Arbitration Rules to Rebalance Arbitrator Selection and Codify Forum Practices
From the desk of Jim Eccleston at 蘑菇传媒
The Financial Industry Regulatory Authority (FINRA) has approved significant amendments to its Codes of Arbitration Procedure designed to rebalance public arbitrator selection, increase transparency, and formalize several long-standing practices in the arbitration forum. According to FINRA’s Regulatory Notice 25-16, the changes take effect January 26, 2026, and will apply prospectively based on the type of procedural action involved.
At the center of the amendments is a recalibration of how FINRA generates lists of public arbitrators in customer and industry disputes that require three-arbitrator panels. Before the amendments, the list selection algorithm gave chair-qualified public arbitrators a statistical advantage because they could appear on both the chairperson list and, if not selected, the public arbitrator list. Public arbitrators who lacked chair qualification only had a single opportunity to appear, according to Regulatory Notice 25-16. FINRA addressed that imbalance by revising the rules so non-chair-qualified public arbitrators receive two chances for selection on the public list. The change preserves the existing process for appointing chairpersons and does not permit non-chair-qualified arbitrators to serve as chairs.
According to Regulatory Notice 25-16, the amendments further codify FINRA Dispute Resolution Services’ current disclosure practices. Arbitrator disclosure reports now will expressly include full employment history beginning after the arbitrator’s education, rather than limiting disclosures to the prior 10 years. FINRA formalized this practice by updating the rule text and clarifying that parties will receive this information through a standardized disclosure report.
FINRA also clarified that parties may submit such requests for additional arbitrator information at any stage of the proceeding. The revised rules allow parties to file written requests without identifying themselves, prohibit disclosure of the requesting party’s identity absent an objection, and impose clear deadlines. Opposing parties must object within 10 days, and the Director will forward the request and any objections to the arbitrator if the requesting party does not withdraw the request within five days after objections are served.
To address repeated late extension requests, FINRA codified its practice of denying requests to extend the deadline for submitting ranked arbitrator lists when parties file those requests after the deadline has expired, absent extraordinary circumstances.
The amendments also formally authorize the Director to remove an arbitrator at any stage of the proceeding when all named parties agree in writing. However, the rules prohibit parties from removing an arbitrator who is considering a request to expunge customer dispute information, subject to existing challenges for cause.
Finally, FINRA strengthened protections around challenges to arbitrators. The revised rules prohibit parties from informing arbitrators or panels about an opposing party’s request to remove an arbitrator for cause. If such a disclosure occurs, the requesting party may seek removal within five days. Absent extraordinary circumstances, the Director must grant a timely motion; failure to act within the five-day window results in forfeiture of the challenge.
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Tags: eccleston, eccleston law, finra
